What is next?

Accountability has been a hot topic for international regulators for many years including within the Central Bank of Ireland (“CBI”).  A key step in the Irish journey began with the introduction of the Fitness & Probity Regime in 2011 which was put in place to ensure that individuals who hold certain positions in regulated firms are committed to the highest standards of competence, integrity and honesty. 

The Dear CEO letter issued by the CBI in April 2019 reemphasises the importance of fitness & probity and the topic continues to evolve. 

A key element contributing to this is an output from the Culture Report involving the main five Irish Pillar banks issued in 2018, in this the CBI indicated proposals for an enhanced Individual Accountability Framework including the Senior Executive Accountability Regime (“SEAR”).

Central Bank (Amendment) Bill 2019

On June 18, 2019, The Minister for Finance and Public Expenditure & Reform Paschal Donohoe TD, announced the Government’s intention that it plans to begin drafting the Central Bank (Amendment) Bill 2019.

The proposed legislation will seek to address the proposals that have been put forward by the CBI on foot of the Culture Report with the aim of driving greater accountability, raising the standards of expected behavior of individuals and firms to improve transparency and accountability in the financial sector; achieve better outcomes for consumers; and improve the financial stability of the financial system.

Engagement is now underway between the Department of Finance and the Attorney General’s Office to draft a Heads of Bills which will then be brought forward to the Government.

What is being proposed?

Senior Executive Accountability Regime – an accountability regime which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision making lies for their business including the potential of documenting of a Responsibility Map and individual Statements of Responsibility.

Conduct Standards - enhancing existing standards with the introduction of new standards at both an individual and firm level which will impose binding and enforceable obligations on regulated financial service providers and the individuals working within them to adhere to specific conduct standards.

Enhancements to Fitness and Probity – supplementing and enhancing the existing Fitness and Probity Regime to ensure the effective operations of the Regime and its ongoing ability to support the CBI proposals to introduce  the new individual accountability framework and conduct standards.

Unified enforcements process - removing hurdles, namely pursuing action against an individual where they are a ‘person concerned in the management’, the case has been proven against the firm and it can be proven that the individual participated in the breach, so the CBI can pursue individuals directly.

Technical Amendments – to support the improvement of the legislation and to clarify certain statutory processes.

In the press release dated June 18, 2019 it is noted:

“The proposed legislation is necessary and timely and will drive positive changes in terms of wider banking culture, greater delegation of responsibilities, and enhanced accountability while simplifying the taking of sanctions against individuals who fail in the financial sector roles”.

What can you be doing now?

Although the exact scope of the new regime is still subject to finalisation and consultation it seems reasonable to assume that this will continue to be a focal area within the financial sector and for the CBI therefore this is the time to start getting prepared.

It is beneficial for firms to be proactive in their approach and pre-empt any potential issues or drawbacks by positively embracing the current and proposed regimes and ensuring that structures, reporting lines, roles and responsibilities are in place to support individuals being accountable.

Whilst the proposed reforms are good practice and what is currently proposed is expected by the CBI, implementing and making sure that how this is working in practice is clearly evidenced, documented and lived (ongoing compliance) could put pressure on resources and timelines.

“This is an opportunity to bring real change in the financial services industry – changes that are not reactionary, but proactive and carefully considered”.

Minister Donohoe

Department Of Finance press release, June 18, 2019

Deloitte has vast experience in implementing the Fitness & Probity Regime and the UK’s Senior Manager and Certification Regime (“SMCR”) which enables us to provide practical support and guidance. We can provide solutions and expertise to assist you in understanding what the potential heightened level of accountability will mean in practice and how you can start to build on the current regulatory expectations that will enable you to demonstrate compliance.

Furthermore we have significant expertise in supporting Boards and its members to become more effective in overseeing their organisation’s key risks, strategy, and overall governance structure and we work with clients across all aspects of conduct regulation including the development of overall compliance and conduct risk frameworks including systems of internal control.